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95 Cards in this Set

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What is the rule regarding a firm offer under the UCC?
An offer by a merchant to sell goods in a signed writing, which by its terms give assurance that it will be held open, is not revocable (even for lack of consideration) during the time stated (or if no time is stated for a reasonable time, but in no event exceeding three months).
Under what circumstances may a merchant revoke a firm offer made to a buyer?
1. After a reasonable time, not to exceed 3 months, OR

2. Upon Rejection by offeree

**Note: Rejection must be clearly made. Bargaining language such as 'If you can't meet this new price, I will have no choice but to buy from someone else!' does not rise to the level where it would be reasonable for the manufacturer to sell to someone else.
Under the common law, when is the offeree bound under a unilateral contract?
the offeror is bound only when the offeree completes performance, and the offeree is never bound to perform because she has never promised to do so.

Majority - once offeree starts performance, offeror cannot revoke w/o allowing offeree reasonable time to complete performance.
When can a 3d party beneficiary enforce a contract?
Only if party is the intended beneficiary.

Key: Ask yourself 'To whom is performance to be rendered?' If performance is to the third party, she is a protected beneficiary and thus entitled to sue. But if the promised performance is to be rendered to the promisee, the contract is for the benefit alone of the parties thereto, and any third party is an incidental beneficiary.
What is a bilateral executory accord?
'an agreement that an existing claim shall be discharged in the future by the rendition of a substituted performance.'

b. EXAMPLE: C (creditor) writes D (debtor), 'I promise to discharge the debt you owe me upon delivery of your black mare if you promise to deliver the horse to me within a reasonable time.' D promises. Their agreement is a bilateral executory accord. Note, too, that if D delivers the horse and C accepts it, there is an accord and satisfaction. The agreement is the accord. Its performance is the satisfaction.
What terms are required to meet the statute of frauds under the UCC?
Quantity.

Under the UCC, the only term that must be included in a writing sufficient to satisfy the Statute of Frauds is the quantity term.
Under the UCC, what is the measure of damages for non-delivery, or repudiation by a seller?
The difference b/w the market price at the time buyer learned of breach and the contract price.
When must a modification of a contract for the sale of goods be in writing?
Under the UCC, a modification regarding the sale of goods of
When is a writing required for the sale of goods under the UCC?
Sale of goods of
When may an express promise to pay legally enforceable w/o new consideration?
An express promise by a debtor to pay a debt barred by the statute of limitations or by a decree in bankruptcy is legally enforceable without new consideration.

The promise is supported by the past consideration of the unpaid debt, which is still operative to give validity to the new promise.
Under what legal theory may a subcontractor be bound to a quote for service to a contractor?
Promissory Estoppel.

A promisor who induces substantial change of position by the promisee in reliance on the promise is estopped to deny its enforceability as lacking consideration. The reason for the doctrine is to avoid an unjust result.
Is a promise to pay a past debt enforceable absent new considearation?
Yes.

an express promise to pay all or part of an indebtedness of the promisor, discharged or dischargeable in a bankruptcy proceeding begun before the promise is made, is binding.

THEREFORE: The debtor's promise is enforceable without additional consideration.
What is the effect of mutual mistake upon the effect, or force, of a contract?
There is no contract.

RULE: The first requisite of a contract is that the parties manifest to each other their mutual assent to the same bargain at the same time.

Thus, if there was no 'meeting of the minds' regarding the essential terms of the purported agreement, there was no contract.
Does the theory of 'substantial performace' apply under the UCC?
No.

Acceptance of goods obligates buyer to pay for the goods accepted, but does not prevent him from asserting his rights as to goods that have not been delivered.
What are the rights of a seller when a buyer wrongfully rejects or revokes acceptance of goods on or before delivery date?
With respect to the whole undelivered balance, the aggrieved seller may:

1. Withhold delivery of such goods;

2. Stop delivery by any bailee;

3. Resell and recover damages (either public or private sale);

4. Recover damages for non-acceptance; or

5. Cancel the contract.
What is the effect of the Parol Evidence rule on subsequent oral agreements?
The parol evidence rule does not bar the admission of oral agreements made after the execution of a written contract.
Is a contracting party entitled to damages where the other party has been deemed to have substantially performed?
Yes.

Even though a party may not have suffered any pecuniary injury resulting from a breach of contract, he is nonetheless entitled to any consequential damages (like the cost of covering, or finding replacement) or at least be entitled to nominal damages.
What is the effect of a counter-offer on the offeree's power of acceptance?
An offeree's power of acceptance is terminated by the making of a counter-offer.
Under the Statute of Frauds, when must an agreement be in writing?
MY LEGS:

1. Marriage Contracts,

2. Year - contract not capable of being performed w/in a year of their making.

3. Land

4. Executor - contracts of exec./admin. to answer for duty of the decedent,

5. Guarantee - contracts of guarantee or sureityship, and

6. Sale of goods over
What items must a writing contain to satisfy the statute of frauds?
1. Parties Names,

2. Sufficient description of the performance, or property to be sold,

3. Price terms,

4. Signed by party against whom enforcement is sought.
In what manner may an offer to buy goods (orders) be accepted?
1. By Promise - prompt promise to ship the goods, or

2. Shipment - prompt shipment of conforming goods.
When may a 3d party delagee be obligated under a contract?
the third party becomes liable if it accepts the delegation.
What are the requirements for a request of adequate assurances under the UCC?
Demand for adequate assurances be in writing.

If not requested in writing, there is no anticipatory repudiation for failure to give adequate assurances.
What is the measure of damages for misrepresentation?
Majority - Benefit of the Bargain Theory.

(difference b/w value of property as represented & actual value of property irrespective of actual purchase price)
What are the elements of fraudulent misrepresentation?
5 Elements:

1. Intentional,

2. Material misrepresentation,

3. Made with scienter (guilty knowledge),

4. Justifiable Reliance, and

5. Damages
When is a 3d party beneficiary contract subject to modification or revocation?
Modification or rescission is possible UNTIL the time the 3d party’s rights vest.
When are a 3d party's rights considered 'vested' under a 3d party beneficiary contract?
Vesting occurs when 3d party learns of the K, and does one of the following:

1. Manifests assent to it at the request of one of the parties,

2. Materially changes his position in reliance on the contract, or

3. Files suit to enforce rights under the contract.
What is the general rule regarding contract modifications under the UCC?
General Rules:

1. No writing required in order to modify existing contract, and

2. No new consideration required to modify a contract.
What is the exception to the general rule regarding contract modifications under the UCC?
Express Writing Requirement

Parties can provide in their original agreement that its terms may be modified only in writing, which overrides the general rule
When can a forebearance act as valid consideration?
Only when forebearance was promised in a bargained for exchange.

The mere fact that a party ACTUALLY forebore is insufficient to constitute consideration UNLESS the forebearance was PROMISED in exchange for the performance of the other party.
What are the requirements of a valid contract?
1. Offer,

2. Acceptance of that offer before revocation,

3. Consideration, or a substitute

4. Legal Capacity of the parties, and

5. A legal objective
What is an implied-in-fact contract?
1. Contractual obligation based on

2. Consensual Agreement, but

3. Agreement fails to express the agreement of parties in its entirety

Example: to pay 'reasonable value' for service, where price is not discussed in advance.
what is an implied-in-law contract?
Quasi-Contract or Restitutionary Obligation

1. Contractual obligation that arises

2. Where one party bestows a benefit on the other

Ex: a surgeon who performs emergency surgery on an unconscious patient - there is an implied-in-law contract to pay for his services.
What are the requirements of a valid offer?
1. Outward manifestation,

2. Signaling that acceptance will conclude the deal
What is the general rule regarding offers at an AUCTION?
General Rule:

1. Auctioneer is inviting offers, and

2. Bids are construed as offers.

Exception - 'No Reserve' Auctions

Here, auctioneer is making an offer to sell to highest bidder.
Is a 'No Reserve' auction construed as an invitation for offers, or as an offer itself?
Exception to General Rule:

A 'no reserve' auction is an OFFER to sell to the highest bidder.
How may an offer be revoked?
4 Ways:

1. Lapse of time,

2. Death or Incapacity of either party,

3. Revocation by offeror,

4. Rejection by offeree
What is required for offeror to revoke an offer?
1. Must occur PRIOR to acceptance, and

2. Be effectively communicated to the offeree
How can an offer made in a newspaper or advertisement be revoked?
1. Revocation Communicated

2. By Same Advertisement or a FUNCTIONAL EQUIVALENT, and

3. No Better means of notification is reasonably available.

EFFECT: offer revoked even if offeree is utterly unaware of such revocation.
May an offeror revoke an offer, even if he expressly promised offeree he would hold offer open?
Yes.

1. Offeror is free to revoke an offer at ANY time BEFORE acceptance,

2. UNLESS, a valid options contract (or firm offer under UCC) has been created.
What are the required elements to establish an enforceable options contract?
1. An Offer,

2. Subsidiary promise to keep offer open, and

3. Consideration in exchange for keeping offer open.
What are the 2 categories of unilateral contracts?
1. Reward Offers

offer to pay a reward for successful performance of some act.

2. Real Estate Brokerage Agreement

promise by owner to pay fee in exchange for actual sale of the property (performance)
What are the Common Law & Modern rules regarding revocation of a unilateral offer after performance has begun.
Common Law:

Offer could be revoked at any time before performance was complete, even if performance is substantially rendered.

Modern Rule:

Once offeree begins performance, an OPTION K is created, and offeror may not revoke.

Note: mere preparation is not considered performance.
What are the elements of effective acceptance of common law offer?
1. Mirror Image Rule
Acceptance must mirror the terms fo the offer

2. Communication of Acceptance
Acceptance must be communicated to the offeror
What is the rule regarding 'additional terms' under the UCC?
Additional terms become part of the contract UNLESS:

1. Offer expressly limits acceptance to the terms of the offer,

2. Offeror OBJECTS to additional terms w/in a REASONABLE TIME after receiving notice of them; OR

3. Additional terms would materially alter the contract.
What is 'Insufficient Consideration?'
An ABSENCE of consideration
What is a 'Failure of Consideration?'
Claim that other party has NOT PERFORMED in accordance w/ his promise.
What is an illusory promise?
Promise to perform that:

Leaves performance to the DISCRETION of the promising party.
What are the elements of Promissory Estoppel?
1. A promise,

2. Foreseeable Reliance,

3. Actual Reliance,

4. Damages or Injustice w/o Enforcement.
What elements are required to satisfy the Statute of Frauds?
1. Identity of the Parties,

2. Nature & Subject Matter,

3. Essential Terms of unperformed promises in the agreement.
What is the Parol Evidence Rule?
1. Where K is FULLY INTEGRATED

2. No Evidence can be admitted to:

3. Vary, Contradict, Add to, or Subtract from obligations stated in the writing.
When is Parol Evidence admissible in connection with a FULLY INTEGRATED contract?
1. Explain or Interpret
(Trade Usage, Past Dealings, etc.)

2. Resolve Ambiguities
What are the exeptions to the Parol Evidence Rule?
1. Fraud

2. Mistake

3. Illegality

4. Duress

5. Partial Integration

6. Conditions Precedent
What are the rules regarding 'Risk of Loss' in non-carrier cases for Merchant & Non-Merchant sellers?
Risk of Loss - Non-Carrier Case:

1. Merchant Seller

Risk of loss on seller until BUYER takes POSSESSION

2. Non-Merchant Seller

Risk on loss on seller until seller TENDERS the goods

(i.e. - makes the goods available for pick up)
What are the UCC & Common Law distinctions regarding contract modification?
UCC Modifications
__________________

1. Good Faith
2. No Consideration Required

Common Law Modifications
____________________

1. Pre-Existing Duty Rule
2. New Consideration Required
What are the requirements of Frustration of Purpose as a defense to a contract?
1. Party's principal purpose for entering the K is frustrated,

2. Frustration is Substantial, and

3. Non-occurance of the frustrating event must have been a basic assumption of the K.
What is a promissory condition
1. Contract performance is conditioned

2. Upon promised PERFORMANCE of the other party
What is a 'pure condition?'
1. Contract performance conditioned

2. Upon occurrence of events

3. Beyond Control of EITHER party
What are the 'Real Defenses' to a contract?
1. Incapacity
(infancy, duress, illegality)

2. Misrepresentation
(fraud, omissions, non-disclosures)

3. Public Policy
(contrary to public safety/welfare)
Expectation Damages
Standard measure of damages

Sufficient damages for her to buy a substitute performance.

Also known as "benefit of the bargain" damages
Reliance Damage Measure
Use when plaintiff's damages are too speculative to measure.

Reliance damages award the plaintiff the cost of her performance; i.e., they are designed to put the plaintiff in the position she would have been in had the contract never been formed
Consequential Damages
Losses resulting from the breach that any reasonable person would have foreseen would occur from a breach at the time of entry into the contract.

In contracts for a sale of goods, only a buyer may recover consequential damages.
Incidental Damages
Incidental damages include expenses reasonably incurred by the buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller's breach and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer's breach.
Liquidated Damages
Two requirements for Enforcement

1. Damages for contractual breach must have been difficult to estimate or ascertain at the time the contract was formed; and

2. Amount must have been a reasonable forecast (compare the amount of damages prospectively probable at the time of contract formation and the liquidated damages figure)

If the liquidated damages figure is construed as a "penalty" it will not be enforced
Buyer's Damages: Seller Does Not Deliver or Buyer Rejects Goods or Revokes Acceptance
Either:

1. Benefit of the Bargain:
(Market Price) minus (Contract Price)

OR

2. Cover: (Cost of Replacement Goods) minus (Contract Price)

--"Cover" requires buyer to make reasonable contract for substitute goods in good faith and without reasonable delay

Note: "Market Price" for buyer's damages is determined as of the time the buyer learned of the breach and at the place of tender
Buyer's Damages: Seller Delivers Nonconforming Goods that Buyer Accepts
Warranty Damages:

(Value of Goods had they Conformed to the Contract)

minus

(Value of the Goods as Delivered)

plus

(Incidental and Consequential damages)

Note: Buyer must, within a reasonable time after she discovers or should have discovered the defect, notify the seller of the defect or else she loses the right to sue
Buyer's Damages: Anticipatory Breach
(Market Price at time Buyer Learned of Breach)

minus

(Contract Price)
Seller's Damages: Where Buyer Repudiates or Refuses to Accept Conforming Goods
Note: For seller's damages, "market price" measured as of the time for delivery

The seller can:

1. Recover (Market Price) - (Contract Price)

2. Resell the goods and recover (Contract Price) - (Resale Price)

3. If Lost Volume Seller: (Contract Price) - (Cost to Seller)
Seller's Damages: Where Buyer Accepted the Goods or Has Not Accepted and Seller Unable to Sell
Seller may maintain action for the contract price
Contracts for Sale of Land
(Fair Market Value of Land) - (Contract Price)
Employment Contract: Breach by Employer
Full Contract Price (although damages may be reduced if the employee fails to mitigate)

Employee under Duty of Care to find position of same kind, rank, and grade in the same locale but the burden is on EMPLOYER to show that such jobs were not available.
Employment Contract: Breach by Employee
Employer entitled to the Cost of Replacing the Employee

(Difference between Cost incurred to get a second employee to do the work and the cost to the employer had the first breaching employee done the work)

Modern view allows employees to off-set damages through quasi-contractual recovery for the work done to date
Construction Contracts: Breach by Owner
If during construction, builder entitled to the profits he would have made plus any costs expended

If after construction completed, builder entitled to the full contract price plus interest
Construction Contract: Breach by Builder
Owner entitled to the cost of completion plus reasonable compensation for the delay

If breach is late performance, owner entitled to the damages incurred because of late performance

Builder can offset or recover for work performed to avoid unjust enrichment
Installment Payments
If an installment payment is missed, party only entitled to recover that missed payment unless there is an acceleration clause
Certainty Rule for Damages
Plaintiff must prove that losses suffered were certain and not speculative

For "lost profits" from starting a new business, modern courts may award damages if they can compare to similar businesses
Duty to Mitigate in Manufacturing Contracts
Manufacturer under duty to mitigate by not continuing work after the breach.

But if the facts are such that completion of the manufacturing project will decrease rather than increase damages, the manufacturer has a right to continue
Restitution
Based on preventing unjust enrichment when one has conferred a benefit on another without gratuitous intent

Can provide remedy when contract exists and has been breached or when contract is unenforceable ("implied in law contract" or "quasi-contract")

Usually measured by the value of the benefit conferred on defendant

But if the benefits are difficult to measure or would achieve unfair result, it can be measured by detriment to plaintiff

This can be awarded even if the plaintiff was the breaching party (but limit recovery to contract price less damages incurred as a result of the breach)
Restitution of Advance Payments or Deposit
When there is a deposit or advance payment, unless seller can prove greater damages, he is entitled to keep advance payments totaling 20% of the purchase price or $500, whichever is less.

If there is a valid liquidated damages clause, seller only has to refund the excess over the amount of the liquidated damages clause.
Rescission
Rescission is a remedy whereby the original contract is considered voidable and rescinded

Grounds for rescission must have occurred either before or at the time the contract was entered into

1. Mutual mistake of a material fact

2. Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party's expectations under the contract.

3. Unilateral mistake if hardship by the mistaken party is so extreme that it outweighs the other party's expectations under the contract.

4. Misrepresentation of fact or law by either party as to a material factor in the negotiations that was relied upon; and

5. Other grounds, such as duress, undue influence, illegality, lack of capacity, or failure of consideration
Statute of Limitations in Breach of Warranty Actions
Under UCC, statute of limitations is 4 years

Express Warranties that extend to future performance of the goods: period begins to run when the buyer should have discovered the breach

Implied Warranties: Period begins to run on delivery
Intended vs. Incidental Beneficiary
Only intended beneficiaries have contractual rights

In determining whether a beneficiary is intended, consider whether the beneficiary:

1. Is identified in the contract

2. Receives performance directly from the promisor; or

3. Has some relationship with the promisee to indicate intent to benefit
Two Types of Intended Beneficiaries: Creditor Beneficiaries and Donee Beneficiaries
Creditor Benficiary: Person to whom a debt is owed by the promisee

Donee Beneficiary: A person to whom the promisee intends to benefit gratuitously
Intended Beneficiary Can Enforce a Contract When His Rights Vest
Right vest when he:

1. Manifests assent to a promise in the manner requested by the parties

2. Brings a suit to enforce the promise; or

3. Materially changes position in justifiable reliance on the promise.

Prior to vesting, promisor and promisee are free to modify contract or rescind beneficiary's rights under the contract
Third-Party Beneficiary vs. Promisor
Promisor can raise against the third-party beneficiary any defense that promisor has against promisee

Whether promisor may use defenses that promisee would have against third-party beneficiary depends on whether the promisor has made an "absolute promise to pay" or only a "promise to pay what the promisee owes the beneficiary"

Absolute promise: cannot assert promisee's defenses

Not absolute: can assert promisee's defenses
Third-Party Beneficiary vs. Promisee
Creditor Beneficiary can sue the Promisee or the Promisor but may only obtain one satsifaction

Donee Beneficiary cannot sue the Promisee unless grounds for detrimental reliance exist
Assignment of Contracts
Generally, all contractual rights may be assigned, except:

1. An assignment that would substantially change the obligor's duty or risk (personal service contract where the service is unique, requirements and output contracts where the assignee will substantially vary the quantity);

2. An assignment of future rights to arise from future contracts (not future rights in already existing contracts); and

3. An assignment prohibited by law (e.g., wage assignments)

Clause prohibiting assignment of "the contract" bars only delegation of assignor's duties.

Clause prohibiting assignment of contractual rights does not bar assignment, just gives obligor the right to sue for damages

But if clause provides that attempts to assign "will be void" then the parties can bar assignment

Also, if assignee has notice of the nonassignment clause, an assignment will be ineffective
Assignment of Contracts Compared to Assignment of Lease
Assignment of a contract

1. Establishes privity of contract between obligor and assignee

2. Extinguishes privity of contract between obligor and assignor

Assignment of Lease

1. Does not establish privity of contract between landlord and assignee (just privity of estate)

2. Does not extinguish privity of contract between landlord and assignor
Assignment for Value
Assignment is "for value" if it is:

1. Done for consideration; or

2. Taken as security for, or payment of, a preexisting debt

Assignments for value are not revocable
Gratuitous Assignment
Gratuitous (not for consideration) Assignments are revocable

A gratuitous assignment will be irrevocable if:

1. The obligor has already performed

2. A token chose (i.e., a tangible claim, such as a stock certificate) is delivered;

3. An assignment of a simple chose (i.e., an intangible claim, such as a contract right) is put in writing; or

4. The assignee can show detrimental reliance on the gratuitous assignment (i.e., estoppel)
Methods of Revoking a Gratuitous Assignment
A revocable gratuitous assignment may be terminated by:

1. The death or bankruptcy of the assignor

2. Notice of revocation by the assignor to the assignee or the obligor;

3. The assignor taking performance directly from the obligor;

4. Subsequent assignment of the same right by the assignor to another
Assignee vs. Obligor
Assignee can sue obligor because he is a real party in interest

Obligor has as a defense against assignee any defense inherent in the contract (failure of consideration, etc.) and other defenses that came into existence before the obligor had knowledge of the assignment

Obligor CANNOT raise by way of defense any defenses the assignor might have against the assignee
Successive Assignments of the Same Rights
If 1st assignment is revocable, subsequent assignment revokes it.

If 1st assignment is irrevocable, it will usually prevail.

But if 2nd assignee has paid value and taken without notice of the 1st assignment, he will prevail if:

1. He gets the first judgment against the obligor

2. He gets the first payment of a claim from the obligor

3. He gets delivery of a token chose

4. He is a party to a novation releasing the assignor; or

5. He can proceed against the 1st assignee on an estoppel theory
What Duties May be Delegated?
Generally all duties may be delegated

Exceptions:

1. Duties involving personal judgment and skill

2. Delegation would change the obligee's expectancy (e.g. requirements and outputs contracts)

3. A special trust was reposed in the delegator by the other party to the contract

4. There is a contractual restriction on the delegation
Obligee vs. Delegate
Obligee can sue the delegate for nonperformance but can require the delegate to perform ONLY IF there has been an ASSUMPTION (i.e., delegate promises he will perform the duty delegated and this promise is supported by consideration or its equivalent). This promise creates a contract between the delegator and the delegate in which the obligee is a third-party beneficiary